Study On The Measurement And Management Of Chinese Commercial Banks’ Operational Risk Based On Basel Ⅲ

During the forming procedure of the all-round modern commercial bank, with the application of new financing technology such as automation technology, electronic commerce, large scale merge and credit risk mitigation mechanism, credit risk and market risk of bank have been effectively reduced. In the same time, operational risk has been increased greatly. After the financial crisis erupted, in view of the operational risk management exposed many weak links, the Basel bank supervision committee in a timely manner to examine and reflect, made a series of measurement and management policies to revise and improve the work. Under this background, how to manage and measure the operational risk of commercial banks based on the perspective of Basel Ⅲ is the focus of this paper.First of all, we gives an overview of operational risk related basic concepts. Based on the latest supervisory document and research report of the Basel Committee, we analyses the evolution process of the operational risk measurement framework of commercial banks and the reform direction after the financial crisis. Furthermore, we gives a conclusion and an introduction of the operational risk measurement framework under Basel III, according to the latest relevant documents issued by Basel Committee. We mainly focus on the latest measurement methods, the revised Standardized Approach and the Advanced Measurement Approach. The research indicates that the revised Standardized Approach replaces the Gross Income with the Business Indicator as a more effective indicator. However, since the limitations such as high standard of data loss and the measurement model, the Advanced Measurement Approach is hard to be applied in medium-small banks.Applicating the Advanced Measurement Approach to measure the bank’s risk capital allocation requirements is the main stream. Since the extreme value theory mainly considers extreme events of great value-the tail risks, which makes it an appropriate measurement for measuring operational risk. The tests have been done in this paper to form the extreme value theory POT model for Chinese commercial banks’ operational risk. The POT model is introduced in detail in the threshold selection, generalized Pareto distribution parameter estimation, the determination of optimal threshold and the calculation of the operational risk VaR and ES values. Based on the 703 effective operational risk lost data of Chinese commercial banks in the last three decades (1987-2015), we conducted the empirical research, to estimate all kinds of commercial banks in China the required operational risk capital, the results have certain reference value.In the last, we compares the current situation of the operational risk supervisory framework in Chinese to that of Basel Committee, giving some political advisements for Chinese commercial banks of operational risk supervisory from aspects such as operational risk management system, internal data constructing, the perspectiveness of measurement and management, mechanism of information disclosure and strengthening the awareness of risk prevention.